Pacific Trader: A pure play on America’s travel revival

How Vancouver-based American Hotel Income Properties is preparing for an epic tourism rebound.

American Hotel Income Properties has been upgrading and rebranding its hotels

Credit: Embassy Suites by Hilton

Those poolside chairs at this AHIP-owned hotel won’t be empty for much longer

How Vancouver-based American Hotel Income Properties is preparing for an epic tourism rebound

The stock: It’s surprising that Vancouver, where so many fortunes have been made in real estate, is home to so few real estate investment trusts (REITs). The reigning elder statesman of this very small bunch is American Hotel Income Properties REIT LP (TSX:HOT.UN), at just over nine years on the market. Most of that time it traded north of $6. Then came the COVID-19 pandemic, which sent units of the trust, a small cap focused on the travel and hospitality sector in the U.S., down to a low of $1.52 on March 20, 2020. With travel taking off once again—you’ve no doubt heard about the waits at airports and passport offices—just getting back to its old self would represent a more than 50-percent gain for investors buying into HOT at Tuesday’s close of $3.78.

The drivers: The pandemic caught American Hotel Income Properties in the midst of a transition from a network of hotels serving rail crews (which might have been more resistant to the infection) to one focused on more fickle business and leisure travellers. Its 77 properties with 8,712 rooms are still largely located in secondary markets, but they’ve been upgraded and are now branded with partners including Hilton, Marriott and InterContinental. That should put the REIT in a good position to benefit from the recovery in (and, quite possibly, pent-up demand for) travel and tourism.

Market research company STR projects that the average revenue per available room in the U.S. will return to its 2019 level of US$86 a night this year (after collapsing to US$43 a night in 2020) and rise another 8 percent to US$92 a night in 2023.

In the first quarter of 2022, HOT reported a US$4.9-million loss on revenues of US$61.8 million, so it still has some recovering to do. But investors willing to wait for it can enjoy a 6.2 percent dividend yield in the meantime.

Word on the street: “We’re encouraged by progress in operating metrics, even in the face of supply-chain and inflation pressures,” said RBC Dominion Securities analyst Tom Callaghan, who has a “sector perform” rating on the stock and a US$4 price target, in a note to clients over the weekend.

Coming & going: Vancouver-based royalty streaming company Sandstorm Gold Royalties has announced two major acquisitions, of Nomad Royalty Company and a portfolio of royalty assets from BaseCore Metals LP, for a total of $1.1 billion. The transactions are expected to close in the second half of the year.